24 November, 2015
In the recent decision of Jardine Lloyd Thompson Pte Ltd v Howden Insurance Brokers (S) Pte Ltd and others [2015] SGHC 202, the Singapore High Court (SGHC) declined to grant a "springboard injunction" to an employer who sought to prevent a number of its employees taking up employment with a competitor. As there were no post-employment non-competition restraints in the employment contracts, the former employer based its application on alleged breaches of a fiduciary duty owed by employees to act in its interests.
In the absence of local authority on whether springboard orders were available in circumstances other than misuse of confidential information, the SGHC considered the approaches in other common law jurisdictions but ultimately declined to order this relief.
Overview
Jardine Lloyd Thompson Pte Ltd (JLT) made the application to the SGHC after 17 of its employees resigned in April and May 2015 to take up employment with another insurance broker (the New Employer).
JLT sought interim orders pending a final hearing against four of the 17 employees (the Defendant Employees), the New Employer and the employment agency it alleged facilitated the employees' moves to the New Employer.
Springboard injunctions
In essence, springboard injunctions are orders to prevent persons or companies obtaining an unfair competitive advantage which allows them to "springboard" ahead as a result of a breach of contract or other duty.
The springboard injunctions sought by JLT were interim orders to prevent the Defendant Employees from joining the New Employer for any business relating to the insurance broking business and to prevent the New Employer from employing the Defendant Employees.
Although none of the employment contracts JLT had with the 17 employees included a post-employment restraint of trade clause, JLT sought injunctive relief and damages which it claimed arose from:
- the Defendant Employees' breach of contract – namely, alleged breaches of express contractual obligations on the Defendant Employees of a duty of good faith, devotion of working time only to JLT's business, non- disclosure of confidential information and non-solicitation of JLT employees;
- the tort of conspiracy to injure (being a conspiracy to injure JLT's business via the mass resignations); plus
- the Defendant Employees' breach of a fiduciary duty to act in the interests of JLT(which JLT alleged included a duty to warn the plaintiff of an impending raid on its employees).
The SGHC found that there was a lack of any clear evidence from JLT that the Defendant Employees had misused any confidential information or that there was any real risk of misuse of such information. Consequently, the making of any springboard orders would need to be founded on another type of breach by the Defendant Employees.
Different jurisdictions, different approaches
In considering whether springboard orders could be made in the absence of threatened or actual misuse of confidential information, the SGHC considered the divergent approaches in different jurisdictions.
In the UK, the court has accepted that springboard relief is not confined to cases where former employees threaten to misuse confidential information.1 The relevant case involved the coordinated resignation of 75 employees from UBS to work for a competitor.
The court found that resignations on that scale could not have occurred without the knowing encouragement and assistance of certain senior managers and that those senior managers' actions amounted to a breach of their duty of loyalty and fidelity to UBS (being their employer at that time). On the basis of this breach, the court granted interim springboard orders which prevented the competitor from poaching UBS customers and staff.
In contrast, in Hong Kong and Australia, courts have declined to grant springboard relief beyond instances of a misuse of confidential information.2
The SGHC noted that there is no local authority on this issue and favoured the Hong Kong/Australia approach in declining to grant springboard relief. In particular, the SGHC adopted the view of the Hong Kong High Court that the mere recruitment of employees by itself does not promote or produce a competitive advantage for the new employer nor will the law restrain employees leaving an employer or commencing employment with a new employer in the absence of express restrictive covenants or another clear breach of their contract with the old employer.
Orders made to enforce existing contractual obligations
The SGHC did however grant two separate injunctions sought by JLT being orders to prevent the Defendant Employees from disclosing confidential information and orders to restrain the Defendant Employees from soliciting other employees to leave JLT. The SGHC found that, given such obligations were already expressly included in the employees' contracts, the balance of convenience lay in favour of granting such injunctions.
Key takeaways
The decision acts as a reminder to employers to ensure that they have included in employment contracts express restrictive covenants and such covenants are reasonable to protect their proprietary interests.
1 UBS Wealth Management (UK) Ltd v Vestra Wealth LLP [2008] IRLR 965
2 ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd & ors [2005] FCA 130; ICAP (Hong Kong) Ltd v BGC Securities (Hong Kong) LLC & ors [2005]
3 HKC 137
For further information, please contact:
Fatim Jumabhoy, Herbert Smith Freehills
fatim.jumsbhoy@hsf.com
